Monday, February 13, 2017

US Treasuries further weakened ahead of last weekend, weighed by the anticipation of announcement of President Trump’s tax plan. However, selling activities eventually eased in the later session and saw the yields only edged higher by 1-2bps across the curve.

Market
Roundup

US Treasuries further weakened ahead of last
weekend, weighed by the anticipation of announcement of President Trump’s
tax plan. However, selling activities eventually eased in the later
session and saw the yields only edged higher by 1-2bps across the curve.

USD strength extended momentum, aided by
anticipation of President Trump’s tax plan in the near future. DXY index
climbed higher to 100.80, the highest level since Trump’s inauguration on
20 Jan. EUR/USD headed lower to 1.0643 after a short pullback to around
1.0700 on Thursday.

Malaysian sovereign bonds were dealt firmer on
Friday, despite the rise in overnight UST yields. The central bank
announced details for the auction of new 7-year GII. The planned auction
size of RM4.0 billion meets market and our expectations. WI was last heard
at 4.13% ahead of the weekend. On the other hand, industrial production
grew 4.7% in Dec, stronger than the +4.0% projected earlier.

Thai sovereign yield curve was in a
bear-steepening mode as yields on the belly and the back of the curve
increased by 2-5bps on Friday following the dynamic sell-off in US
Treasuries which was damped by risk-on sentiment after Trump promised
corporate tax proposals on Feb 9. Overall market activities leaned on net
selling of longer than 1-year govvies and strong net buying interest in
short-term bonds (less than 1-year tenor) from both local and foreign
players. Profit taking pressure could come on LB26DA as the yield rose
5bps to 2.70%, reversing almost all of its weekly decline about 6bps.

Indonesian govvies were traded in tight ranges on
Friday, as previous day’s rally didn't continue as market’s watch-and-see
stance on Trump's tax plan that caused 10-year US Treasury yield to go up
from 2.33% to 2.41% overnight. Overall tone in government bond market was
still positive, although some profit taking action was seen and market
activities were much lower compared to Thursday, but overall market well
supported, thanks to Moody's outlook upgrade effect. Market volume
decreased to IDR11.5 trillion and was evenly dominated between different
maturities.

ErrataWe make correction to last
Friday's Daily Commentary under the Fx markets segment on status of the rating
outlook on Indonesia to: